Economic Analysis Question

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Summary

The sources of risk in a systems analysis and design project include uncertainties such as weather, compatibility issues, and personnel changes. A project manager copes with risk by conducting a risk assessment, identifying and analyzing risks, and prioritizing them. They then make decisions on how to proceed with the project based on the identified risks. If the risks are too great, the project may need to be re-scoped, changed, or cancelled.If contracted by a jewelry store to manage a project to create a new inventory tracking system, the initial approach would be to conduct a system analysis to determine the acceptance of the project. The project manager would need to interact with the employees of the store to gather information on business needs and the current system in place. They would also need to consider economic, technical, and operational feasibility and set up a team of stakeholders from different departments.The economic analysis carried out during project identification and selection is often superficial because it only considers the monetary benefits and costs. Current resources available and business conditions are more important factors for a potential project to survive the first phase of the life cycle.Assuming monetary benefits of $85,000 per year, one-time costs of $75,000, recurring costs of $35,000 per year, a discount rate of 12%, and a five-year time horizon, the net present value of these costs and benefits of an information system would be calculated using a formula that takes into account the time value of money.

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What are some sources of risk in a systems analysis and design project, and how does a project manager cope with risk during the stages of project management?

A project manager should do a risk assessment for any project before starting. During this stage the project manager should identify uncertainties, analyze risks, and prioritize risks. Every project will have some form of risk, it could be the weather, lead person changing jobs, a new system not being compatible with other already in place systems and each of these risks should have a decision in place.

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Do we still continue the project, do we change something in the project (timeline, etc), or do we stop all together. By knowing what risks are involved and ways around them helps the project be successful or sometimes lets the project manager know that there are too many risks and that the project needs to be re-scoped, changed, or cancelled.

Suppose that you have been contracted by a jewelry store to manage a project to create a new inventory tracking system. Describe your initial approach to the project. What should your first activity be? What information would you need? To whom might you need to speak?

The initial approach to the project would be to do the system analysis to decide regarding the acceptance of the project. In system analysis we need to work in real-time environment. We need to spend some time in the jewelry store in order to have an interaction with the employees of the store. Information gathering must be done during system analysis. We need to take in the business needs and see how that will translate into a system. If there is a system in place, what is wrong with it and what works well? We also need to consider the economic feasibility, technical feasibility and operational feasibility. You would also need to set up a team pulling in people from the different departments this project can affect and start from there. These would be your stakeholders.

The economic analysis carried out during project identification and selection is rather superficial. Why is this? Consequently, what factors do you think tend to be most important for a potential project to survive this first phase of the life cycle?

I believe that current resources available is important for first phase because this can save you a lot of money and also speed up the projects processes if you already have the resources needed readily available. Current business conditions is important because if your already about to go under or your return is nowhere near good then any new project can bring you into the red or even more deeper into the red. 6. Assuming monetary benefits of an information system at $85,000 per year, one-time costs of $75,000, recurring costs of $35,000 per year, a discount rate of 12 percent, and a five-year time horizon, calculate the net present value of these costs and benefits of an information system.

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